AMZN: 3 Must Own Tech Stocks to Buy and Hold for the Next Decade

When you are looking for long-term equity investments it is imperative to focus on the company’s fundamentals and leadership position. More so if these stocks are part of the highly disruptive technology sector. The three stocks we discuss here are quality companies that have the potential to outpace the broader markets in the next decade.

An e-commerce giant in Amazon

When we talk about long-term winners, it’s difficult to ignore Amazon (AMZN), the world’s largest e-retailer. Amazon remains one of the fastest-growing companies in the world, despite its massive size.

AMZN stock is up 70% in 2020 and has surged a staggering 1,880% in the last 10 years. This means a $1,000 investment in Amazon stock back in November 2010 would have ballooned to $20,000 today. While historical gains do not matter much for future investors, Amazon will continue to benefit from the shift towards online shopping all over the world.

The COVID-19 pandemic has accelerated the trend towards e-commerce and might have changed consumer behavior for good. Further, Amazon leads several other business segments and has multiple revenue drivers. It is the third-largest digital ad platform and is also the largest public cloud company in the world.

AMZN stock is valued at a market cap of $1.57 trillion indicating a price to sales multiple of 4.1x which is not too expensive. Comparatively, its earnings are forecast to grow by 51.5% in 2020 while revenue growth is estimated at 35.4%.

Facebook should be on the radar of growth investors

Social media giant Facebook (FB) is another company that is a solid long-term bet. In the September quarter, Facebook grew sales by 22% while earnings per share were up 28%. FB stock is up 36% year-to-date and has surged 630% since its IPO in 2012.

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Facebook will also benefit from the rise in e-commerce sales as digital ad spending will move significantly higher in the upcoming years. Further, at the end of Q3 Facebook had 3.2 billion monthly active users across all its applications. This means it has over 40% of the world’s population on its social media platforms.

Facebook is well poised to grow revenue and earnings at a double-digit rate in the near future. It is also yet to monetize WhatsApp which is probably the world’s most popular instant messaging platform.

Facebook stock is valued at a market cap of $795 billion and might well be the next trillion-dollar giant. It has a price to sales multiple of 9.4x and a price to earnings ratio of 29.9x which is reasonable for a high-growth company.

Adobe is a SaaS giant

The final stock on the list is SaaS (software-as-a-service) heavyweight Adobe (ADBE). The company is one of the most dominant players in creative software and its recurring business model will ensure it can generate predictable cash flows across business cycles.

Its high-performing digital media segment has over 20 applications with a subscription price of $50 per month. Companies can also subscribe to a few products at standalone prices of $10 or $20 per month.

This business has a gross margin of 96% and has grown sales at an annual rate of over 22% in the last two years. ADBE stock has gained 413% in the last five years and is up almost 1,500% since November 2010.

With a market cap of $221 billion, Adobe is trading at a price to sales ratio of 17.3x making it the most expensive stock on this list. Its price to earnings multiple of 46x is also steep which means it will lose significant value in a broader market sell-off. However, that correction will also provide investors to buy a quality stock at a lower valuation.

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AMZN shares were trading at $3,160.48 per share on Tuesday morning, up $29.42 (+0.94%). Year-to-date, AMZN has gained 71.04%, versus a 13.69% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...